Deutsche Bank buys back €1.27 billion of euro notes by Dutch auction

By Susanna Moon

Chicago, Feb. 23 – Deutsche Bank AG said it priced the cash tender offers for five series of its euro-denominated notes that ended at 7 a.m. ET on Feb. 22.

Investors had tendered €1,746,500,000 of the five note series, and the company accepted for purchase €1,268,500,000 of the notes, according to a company notice.

The company said it accepted for purchase all notes tendered under non-competitive tender instructions, with no pro rata scaling; all fixed-rate notes tendered at purchase spreads equal to or greater than the purchase spread, with no pro rata scaling; and all floating-rate notes tendered at purchase prices equal to or less than the purchase price, with no pro rata scaling.

On the other hand, the company said it will not accept for purchase any fixed-rate notes tendered at spreads of less than the purchase spread nor any floaters tendered at prices at more than the purchase price.

Deutsche Bank said on Feb. 12 that it began cash tender offers for up to €3 billion principal amount of its euro-denominated notes and up to $2 billion principal amount of several series of its outstanding dollar-denominated notes, with pricing to be set using a modified Dutch auction.

“The relatively low investor participation reflects the improving market sentiment and an investor preference to retain exposure to Deutsche Bank,” according to a separate company press release.

In the euro offers, pricing was set at 6 a.m. ET on Feb. 23 using a modified Dutch auction.

For the fixed-rate euro notes, pricing was set using the interpolated mid-swap rate for a purchase spread, reference rate and purchase yield as follows:

• 98.989% of par for the €2 billion of 1.25% notes due 2021, with purchase spread of 135 basis points, reference rate of 0.091% and purchase yield of 1.441%; the maximum purchase spread was 160 bps;

• 104.768 for the €2 billion (€1.98 billion outstanding) of 2.375% notes due 2023, with purchase spread of 140 bps, reference rate of 0.236% and purchase yield of 1.636%; the maximum spread was 160 bps; and

• 93.837 for the €1.5 billion (€1,497,600,000 outstanding) of 1.125% notes due 2025, with purchase spread of 140 bps, reference rate of 0.471% and purchase yield of 1.871%; the maximum spread was 165 bps.

Of the amount tendered, the company accepted for purchase €192.9 million of the 1.25% notes, €542.9 million of the 2.375% notes and €250.9 million of the 1.125% notes.

For the floating-rate notes, pricing was set as follows using a modified Dutch auction with a minimum purchase price:

• 98.6% of par for the €2.1 billion floaters issue 2014/2019, with minimum purchase price of 97.10%; and

• 97 for the €1.65 billion floaters issue 2014/2021 with minimum purchase price of 94.40%.

The company accepted tenders for €166.7 million of the floaters due 2019 and €115.1 million of the floaters due 2021

Against the spread and price targets announced Feb. 12, Deutsche Bank decided to further increase the purchase price by 1.5 percentage points to 2.6 percentage points or respectively lower the spreads by 20 bps to 25 bps, according to the company’s press release.

Securities with a notional value of €480 million were tendered at levels tighter than the final purchase spreads or higher than the final purchase prices and were not accepted, the company said.

The company also will pay accrued interest.

The bank previously said it would prioritize the purchases by first accepting non-competitive offers and then notes tendered by way of competitive tender instructions.

To participate, holders had to deliver tender instructions, which were irrevocable, by 7 a.m. ET on Feb. 22.

Settlement will occur on Feb. 23.

Deutsche Bank AG, London Branch is the dealer manager (+44 20 7545 8011 or liability.management@db.com) and tender agent (+44 20 7547 5000, fax +44 20 7547 5001 or xchange.offer@db.com).

Dollar offers

In the offer for the dollar-denominated debt, Deutsche Bank is offering to buy back the notes until 11:59 p.m. ET on March 11.

Pricing for the dollar offers will be set at 11 a.m. ET on Feb. 29 using a reference security.

In the first tranche offers, the bank is offering to purchase up to $500 million principal amount of two series of outstanding notes, based on an acceptable bid spread range minimum spread and base spread, respectively, as follows:

• For the $1.4 billion of 1.35% notes due 2017, the bid spread range minimum is 210 basis points and the base spread is 235 bps; and

• For the $2,131,200,000 of 6% notes due 2017, the bid spread range minimum is 230 bps and the base spread is 255 bps.

In the second tranche offer, the bank is offering to purchase up to $750 million of notes, as follows:

• $2 billion of 1.875% notes due 2018 using a bid spread range minimum of 250 bps and base spread of 275 bps; and

• $2.25 billion of 2.5% notes due 2019 based on a bid spread range minimum of 250 bps and the base spread of 275 bps.

In the third tranche offer, the bank is offering to purchase up to $600 million of notes, as follows:

• $970 million of 2.95% notes due 2020 using a bid spread range minimum of 235 bps and the base spread of 260 bps;

• $1 billion of 3.125% notes due 2021 based on a bid spread range minimum of 260 bps and the base spread of 285 bps; and

• $1.6 billion of 3.7% notes due 2024 using a bid spread range minimum of 275 bps and the base spread of 300 bps.

In the fourth tranche offer, the bank is offering to purchase up to $150 million of its $750 outstanding 4.1% notes due 2026 using a bid spread range minimum of 290 bps and the base spread of 315 bps.

The reference security will be 0.75% U.S. Treasury notes due Jan. 31, 2018 for the 1.35% notes due 2017, 6% notes due 2017 and 1.875% notes due 2018; 1.125% U.S. Treasury notes due Jan. 15, 2019 for the 2.5% notes due 2019; 1.375% U.S. Treasury notes due Jan. 31, 2021 for the 2.95% notes due 2020 and 3.125% notes due 2021; 2.25% U.S. Treasury notes due Nov. 15, 2025 for the 3.7% notes due 2024; and 2.25% U.S. Treasury notes due Nov. 15, 2025 for the 4.1% notes due 2026.

Holders must tender their notes by 5 p.m. ET on Feb. 26 in order to receive the total purchase price, which includes an early tender payment of $30 per $1,000 principal amount.

Those who tender after the early deadline will receive the tender offer payment, which is the total payment less the early premium.

The company also will pay accrued interest to but excluding the settlement date of March 1 for early tendered notes and a final settlement date of March 15 for remaining tenders.

If the offer is oversubscribed, the notes will be accepted for purchase on a prorated basis. Notes tendered before the early tender deadline will have priority over those tendered after the early deadline. Accordingly, if a tranche’s tender cap is reached by the early deadline, none of those respective tranche notes will be accepted for purchase after the early deadline.

Deutsche Bank Securities Inc. (866 627-0391 or 212 250-2955) is the dealer manager. Global Bondholder Services Corp. (212 430-3774 or 866 470-3700) is the tender agent and information agent.

Tendered notes may be withdrawn by 5 p.m. ET on Feb. 26.

“The bank’s strong liquidity position allows it to repurchase these securities without any corresponding change to its 2016 funding plan,” according to a previous company press release.

By tendering for some euro- and dollar-denominated senior notes, the company “intends to manage its overall wholesale funding level and better optimize its future interest expense, while maintaining a prudent approach to liquidity,” the company previously said.

Deutsche Bank is a bank based in Frankfurt.

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